THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING
THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS
BROADCAST. THE NATURE OF LIVE BROADCASTING
MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS
IN THE PROGRAMME CAN GUARANTEE THE ACCURACY
OF THE INFORMATION PRINTED HERE.
Tape Transcript by JANE TEMPLE
MONEY BOX
Presenter: Paul Lewis
TRANSMISSION 27th MAR 2004 1200-1230 BBC RADIO 4
ANNOUNCER: Now it’s four minutes past twelve and time for
MONEY BOX with Paul Lewis:
LEWIS: Hello. In today’s programme interest free
mortgages for 16,000 public servants – will it pump up the housing
bubble? Louise Greenwood’s with me today:
GREENWOOD: I’ll be reporting on the store cards that could
become credit cards:
LYN: I don’t see why I should have to ring up and say I
don’t want you to change my account – if they’re going to change it
then it should be me asking them to do it.
LEWIS: 1.5 million mistakes a year on benefits for
disabled and unemployed people. A top civil servant defends himself.
Has this Money Box listener put his finger on the way to stop identity
fraud:
JAMIE: As far as I know I’m the only person in the UK
doing this at present. I can think of nothing more effective or as simple
or as cheap.
LEWIS: And tax deadlines loom – sooner than you might
expect. But first the government is to help up to 16,000 teachers,
nurses, prison officers, even town planners to buy their first home. The
key worker living scheme will lend up to £50,000 towards the cost –
some teachers may get £100,000. The money will be repaid only when
the house is sold or the individual stops being a key workers. No
interest will be charged on the loan but the government will share any
rise or fall in the value of the property. The scheme which will also
include subsidised homes to rent will only apply in London and the 14
counties in the South East and East of England. Earlier this week
Housing Minister Keith Hill explained the thinking behind the scheme
to Money Box’s Jennifer Clarke:
HILL: The affordability of homes is a particular issue in
retention and recruitment and we are making this offer for key groups
where there are particular problems around vacancies, and we are
determined to ensure that those key public services should be properly
staffed.
CLARKE: What about key workers in the rest of the country
though – there’s large areas of the country where people won’t benefit
from these schemes?
HILL: That is perfectly true and I don’t want to balk at
that at all. But we are looking at a very extensive area of course already
– in terms of London and the wider South-East extends up to the south
Midlands and we’re fairly confident that we are delivering to where the
pressures are the most intense in terms of maintaining decent public
services.
CLARKE: Isn’t there a danger though that this scheme will
actually prove divisive because it’s going to push up prices yet further
for the non key workers who won’t get any help?
HILL: Half of the homes that will result from key
worker living will be new builds so we are responding to the need to
expand housing supply. But at the same time what we have to do is
recognise that our key public services that the public cherishes so much
are at risk of losing key personnel because of housing pressures.
CLARKE: What about the non key workers then? – what
help is the government giving them?
HILL: Well, the government is now spending
unparalleled sums of money in investment is social housing, twice the
level we inherited when we came into power – for example, yesterday
we announced our big new boost for affordable housing will lead to
delivery of 67,000 new, affordable homes across the country.
CLARKE: That’s going to fall far short of the numbers of
people who can’t currently afford to buy a home though isn’t it? Is the
government worried that the number of first time buyers is at a 20 year
low?
HILL: Without excessive complacency let’s also
recognise we’ve built a million new homes since l997, nearly a quarter
– 250,000 of those have been affordable homes. But certainly for first
time buyers there are very serious problems which we don’t
underestimate at all.
LEWIS: Housing Minister Keith Hill. And those
problems were illustrated in a recent survey by Britain’s biggest
mortgage lender, Halifax. It showed that first time buyers on average
incomes can’t afford a home in 80% of the UK’s largest towns. So
what’s caused this mis-match between the homes young people need
and the money they’re paid? David Pannell is director of research at
the investment bank Durlacher - his controversial views about why first
time buyers are being squeezed out and how the problem will be
resolved:
PANNELL: They are being out bid by buy to let investors
who effectively can pay more and move more quickly for the types of
property that a first time buyer would normally want.
LEWIS: So you’re saying the principle thing driving up
the price of property or certainly the price of property first time buyers
might buy is the buy to let market?
PANNELL: Definitely one of the factors. The problem with
the buy to let market is there’s very little good information on it. What
we do know is that they’re effectively buying the same properties as
first time buyers so the average price is about £100,000. They’re
buying flats and terraced houses so they’re certainly in the same – in the
same market. The key issue is that first time buyers can’t afford to pay
the prices that sellers are demanding.
LEWIS: Is there a danger though that putting tax payers’
money into buying homes will boost the market further? – will push
those prices further out of the reach of the – of the first time buyers who
aren’t part of the scheme?
PANNELL: Absolutely. And you can see that in rural areas
where first time buyers have been effectively excluded from the market
for what? – 10 years. And therefore they have to stay at home longer,
live with their parents and so on. And I think that would be the effect
of putting more government money into the market.
LEWIS: How will this problem be resolved?
PANNELL: If you go back to the late 80s and look at the
comments in the press then, it had a very similar issue with first time
buyers being pressed out of the market. The solution then and I suspect
the solution this time round is for house prices to fall to affordable
levels. It’s quite clear to me that if you look over the last 30 years house
prices go up and they go down and I fully expect them to drop this time,
probably by around 30%. That would enable first time buyers who
want to move into the market to buy.
LEWIS: And when will that happen?
PANNELL: That’s the very tricky question. I think the
housing market at the moment is a bubble and bubbles are defined by
people behaving irrationally and therefore trying to put it rationally is
very difficult but my gut feel says that the housing market will turn this
year.
LEWIS: David Pannell. And if you have thoughts on the
problems of first time buyers you can have your say on our website –
www.bbc.co.uk/moneybox where there are also links to details of the
key workers living scheme and who can apply. And you can also hear
the full interview with housing minister Keith Hill. Money Box has
learned that the company behind most of Britain’s high street store
cards is considering converting them into full blown credit cards. If it
does it’ll follow Marks & Spencer and John Lewis which just this week
announced plans for a new credit card. One reason for these moves
could be the recent scrutiny the store card business is under. A
Parliamentary committee recently complained about the high interest
rates and the competition commission is investigating the market. But
the change to credit cards is proving controversial as Louise
Greenwood’s been finding out.
GREENWOOD: One in every three adults in the UK has a store
card and one of the most popular is Debenhams operated by the GE
Capital group. GE controls over half the store cards in the UK
including those for House of Fraser and British Home Stores. Last
autumn is began a pilot scheme offering to upgrade a selected group of
Debenham’s two million store card holders to credit cards but as in the
case of Marks and Spencer which was carrying out a similar exercise at
the time, the Office of Fair Trading was unhappy that customers were
being sent credit cards they hadn’t asked for. Action was taken against
both Marks & Spencer and GE Capital to make them spell out clearly
that customers didn’t have to take the cards. John Vickers, director of
fair trading at the OFT recently told Money Box why:
VICKERS: Our concern was that there was a kind of inertia
in the process so that the consumer who did nothing might find
themselves with a credit card instead of a store card – we believe that it
should be the consumer making a conscious choice and so the way
those cases were sorted out was precisely to put the consumer in the
driving seat.
GREENWOOD: But after the OFT’s initial intervention, GE
began a separate exercise sending new terms and conditions to the
majority of its Debenham’s store card holders. This could mean a big
change. The new small print states that it has the right to up grade the
store cards to master cards and send out a PIN code – in short make
them fully fledged credit cards. Lyn from North London received the
new terms and conditions and rang the call centre to be told a new card
was on the way:
LYN: I don’t see why I should have to ring up and say I
don’t want you change my account – if they’re going to change it then
it should be me asking them to do it or them giving me the option. I’ve
been put in the position where they have made an unsolicited binding
contract with me – GE Capital Bank. I didn’t ask for a master card and I
don’t want one.
GREENWOOD: GE Capital describes the change as merely a
house keeping exercise and says a letter will be issued to customers
when they get the new card giving them the opportunity to ring up and
cancel it. But observers of the credit card market say this paves the way
for a fundamental change. Martin Lewis from moneysavingexpert.com
says burying this detail in the terms and conditions is misleading and
could spell real trouble for customers who may not even realise they’re
being given a credit card at all:
LEWIS: What this is doing – it’s offering those people
who don’t really understand how it works a lot more credit that can be
spent in a lot more places and what’s happening here is it’s just very
subtly being slid underneath the letter box through the door and people
have got it without knowing. Sneak it in the terms and conditions then
flog it hard six months later once you’ve already got the credit cards in
the hands.
GREENWOOD: GE Capital insists it has the right to vary its
terms and conditions but the OFT has admitted that the law in this area
is unclear. This issue has been at the centre of its discussions with both
Marks & Spencer and GE. While the company’s actions are not illegal
George Moody one of the MPs who’s been examining store cards is
unhappy:
MOODY: I think it’s unacceptable – I think it is also taking
the person a fair bit along the road in terms of obtaining a credit card
without them actually expressing any desire to have one. I really would
like the OFT to speak very seriously to Debenhams about this. To
obtain a credit card it should be a conscious, though thought out
decision by the consumer.
GREENWOOD: GE Capital refused to be interviewed by Money
Box but told the programme it would never knowingly operate in a
manner which contravened any laws or regulations and stresses that
customers can cancel any card they don’t want. But the company
admitted it may make similar changes to the terms of its other store
cards. That would release hundreds of millions of pounds of consumer
credit on to the market. Jonathan Charley, banking analyst at UNISYS
says there’s a clear business reason for getting a foot hold in this
market:
CHARLEY: Following the government’s review of the whole
basis of store cards – if the profitability of those is going to be reduced
by regulation then going into credit cards makes an awful lot of sense
for them. Credit cards are highly profitable and also expand their
ability beyond just the store that they were operating as a card.
Secondly, because of the source of information that they can get from
the way that consumers spend with their credit cards gives them a great
opportunity for cross selling into other financial services products.
LEWIS: Jonathan Charley ending that report by Louise
Greenwood. Pensions and benefits in the UK are so complex that even
the officials who process the claims make mistakes in one in five
decisions. When it comes to disability benefits the position’s even
worse. Nearly half the decisions contain an error. The figures were
revealed this week by the House of Common’s public accounts
committee. Its chairman Edward Leigh MP told he was astonished by
what his committee had found:
LEIGH: It was astounding and frankly
unacceptable that one in five benefit decisions contains errors. For
instance if you’re talking about disability living allowance, the error
rate is nearly 50% - half of all cases contain an error and 54% of cases
which go to appeal are then overturned in the customer’s favour so
what we’re talking about is a huge waste of time, effort and money.
The system is simply far too complex. Certainly the customers don’t
understand it and I think it’s increasingly obvious the people who work
in the department or many of them don’t understand it either.
LEWIS: Edward Leigh. And the top civil servant at the
Department for Work & Pensions is its permanent secretary, Sir
Richard Motram. He gave evidence to Edward Leigh’s committee and
on Friday he gave a rare interview to Money Box:
MOTRAM: I think we need to put the level of decision
making error in perspective. The public accounts committee have
produced a report that says around a fifth of our decisions are incorrect
technically
LEWIS: Do you accept that?
MOTRAM: I do accept that, yes of course but actually the
payment accuracy which is the really important thing on our major
benefits is between 92 and 98%. We took around 6.5 million decisions
on these benefits in one year.
LEWIS: About 1.5 million were incorrect?
MOTRAM: 1.5 million we deemed to have an error within
them in terms of how they were decided. I don’t want to quibble over
this but actually in the public accounts committee’s own report they
make quite clear all of this – then just one part of their report is being
pulled out and quoted. The report itself
LEWIS: (talking over) – well it’s paragraph one really
that’s probably why people have pulled it out. It’s obviously what they
think is important and if we just look for example at disability living
allowance, attendance allowance – 45% of those decisions were wrong
– that can’t be adequate?
MOTRAM: It is not adequate no and we absolutely recognise
that and that’s why we’ve got a whole series of measures in hand to
improve that. As the report itself recognises reaching the decisions
properly in relation to these benefits is particularly difficult because
they’re not based on objective criteria because the eligibility to them is
not based on a customer’s illness or disability but on the effect that that
illness or disability has on their life. So you can actually have two
people with exactly the same condition, one of whom is eligible for this
benefit and the other for whom isn’t. These things aren’t that easy.
LEWIS: When you have these problems in getting rid of
errors and getting the right amount of money, is that just the wrong time
to be asked to cut 40,000 of your staff?
MOTRAM: It’s not the wrong time no because the way in
which we intend to make these reductions in our staff is essentially by
providing them with much more effective decision support. Obviously
what we’re not going to do is reduce the people and reduce the quality
of the decisions that we’re taking.
LEWIS: So having 30,000 fewer staff – 10,000
redeployed, that won’t make your job more difficult?
MOTRAM: Well I don’t think it’s making my job easier, but
we are quite clear that we have in place a whole series of ways in which
we can improve this. They include and here I absolutely agree with the
committee, we need to look at simplifying benefits. We operate the
system as Parliament has chosen that it should be designed and I think
that ministers and Parliament have a choice. I personally think we need
to make it simpler.
LEWIS: So is that your message to ministers that the
benefit system is too complicated to administer accurately and you’d
like it to be simpler?
MOTRAM: I’m not saying that it’s too complicated to be
administered accurately but
LEWIS: (talking over) well it appears to be doesn’t it?
MOTRAM: Well it doesn’t because we’re achieving payment
accuracy which is really quite high. The message I think that my
ministers entirely share is that we must look at how we can simplify it
as part of the way in which we help our staff to do a better job while
we’re also bringing about these reductions.
LEWIS: Sir Richard Motram. And with me is Lorna
Reith who’s chief executive of the Disability Alliance. Lorna, Sir
Richard says these mistakes are made but they don’t really matter – do
they actually cause hardship?
REITH: They certainly do. For disabled people we’re
talking about a possible reduction in weekly income of anything up to
£100. And lots of people live in hardship as a result of wrong
decisions.
LEWIS: So when he says payment accuracy he doesn’t
necessary mean the money that’s given to people – that’s if the money’s
said to be £20 – they get £20. This is actually saying you’re not entitled
when you really are?
REITH: That’s right and the fact that 54% of the cases
for disability living allowance go to appeal are over turned in the
customer’s favour is an indication of just what a big problem we’ve got
here. Most people don’t appeal. Most people take the decision that
they’re sent and just accept it particularly if it’s the first time they’ve
claimed. In general it’s people who’ve been getting the benefit and
then have it stopped who think there’s something wrong here, I’ll get
advice, I’ll appeal. Most people don’t. The problem is much bigger
than the figures would indicate.
LEWIS: Yes cos the department has made much of the
fact that not many people do appeal. Is it easy to appeal?
REITH: It’s not easy at all. As he said it is a complicated
benefit – lots of people don’t understand the eligibility criteria. The
letters that go out from the department are not easy for people to
understand and you only have a month in which to get in an appeal and
if you’re somebody say with a visual impairment or a learning disability
you have to wait for someone else to read the letter to you and explain
what it means. A month is not very long in which to get all your act
together to put in an appeal.
LEWIS: And when you do put in an appeal can you just
say I appeal or do you have to explain why?
REITH: No, you have to explain why. You have to say
what bit of the decision that you’re unhappy with and give grounds.
You may have to get additional medical evidence and I think again it
costs – many people have to pay for the medical evidence that they
need when they go to an appeal. They don’t ever get that money back.
LEWIS: And what needs to happen in your view –
obviously the best thing is if the decisions are right in the first place.
REITH: Absolutely.
LEWIS: What needs to happen to make that happen?
REITH: Well certainly better claim forms and that is
something that I know the Department for Work & Pensions is working
on and they are making changes and there’s good progress there – more
help with completing forms. They are still quite daunting forms. They
require a lot of descriptive ability on the part of the claimants so help
with people completing forms, better evidence gathering by decision
makers – this is one of those things that comes up again and again and
my worry in hearing about the potential staff cuts is that this is the area
of the work that would be affected. Decision makers need to go back to
the customer and say we’re not clear what you’ve put on the form. Can
you explain that a bit more.
LEWIS: Lorna Reith from Disability Alliance, thanks
very much. And you can hear a longer version of my interview with Sir
Richard Motram on our website – those details later. Last year more
than 100,000 people had their identity taken and used by criminals to
steal money or goods. Identity fraud is one of the fastest growing areas
of credit fraud in the UK and it could account for more than a billion
pounds a year of criminal profits. Anyone can be a victim – a
carelessly discarded letter or receipt can give the fraudster all they need
to pass themselves off as you. But is the financial industry taking the
problem seriously enough? One Money Box listener thinks not. Jamie
from Scarborough has taken the solution into his own hands – literally.
He’s told the three credit reference agencies that any finance document
signed by him must be authenticated by a thumb print.
JAMIE: If someone has stolen my identity, basically I can
hold that lender responsible. I can say is there a print on it? if the
answer’s no then that product shouldn’t have been given in the first
place. If there is I can say well it’s not mine and yet again that print
could be given to the police as a need to identifying the perpetrator.
The total cost of it to myself was basically three letters – three stamps
and a little pad that I carry around with me permanently. I can think of
nothing more effective or as simple or as cheap.
LEWIS: Jamie Jamieson. Well with me is Neil Monroe a
director of Equifax one of the three credit reference agencies Jamie
mentioned. Neil, has Jamie put his finger or I suppose his thumb on the
answer here?
MONROE: Well it’s certainly one of the answers. However
it is going to be a little bit time consuming if he does want to go and get
credit because the way the system would work is that his application
would get referred so if he doesn’t take out a lot of credit then it would
perfectly fine.
LEWIS: So he wouldn’t get instant credit cos there’d be
this extra message people would have to read and they’d have to check
it and you know
MONROE: Absolutely – absolutely.
LEWIS: But he says he’s been driven to this because the
credit reference industry isn’t solving the problem. What are you doing
about it?
MONROE: Well I would take issue with that comment.
We’re doing an awful lot with that with lenders – more and more
lenders and ourselves are aware of the growth of fraud as you’ve said
and there are a number of systems that are being introduced – I
obviously wouldn’t want to go on air and tell you about those in
particular detail for maybe fraudsters listening but there are systems
that are being introduced which are using more and more the data that is
held about individuals to make sure that the individual that is applying
is actually that individual.
LEWIS: But one of the things you do store on your
system is dates of birth. Why don’t people in stores have to give that
because that would stop a lot of fraud wouldn’t it – the fraudster would
be the wrong age or they wouldn’t know the date of birth?
MONROE: I think date of birth is actually required an awful
lot of time now when you are in a store or when you are making an
application either over the Internet or by post and in fact for other
reasons there is a requirement now to collect that when you’re a lender
and that is being used more and more – but there are other data bases
that are being used by the lenders as well – such things as telephone
number verification, employment verification. That data is increasingly
held by people like ourselves and is therefore used more and more.
LEWIS: And what’s the way for people who maybe don’t
want to carry around a pad in their pocket to put their thumb print on
things – what is the way for us as individuals to protect ourselves
against ID theft and fraud?
MONROE: I think there’s a number of actions that people
have to – to look at: you have to be very, very careful about the
information that you hold, make sure you look after it, don’t carry a lot
of information around with you. If you lose documents make sure you
report them. If you are throwing information away as you said earlier,
make sure it’s shredded or destroyed at least. Also check your
information on a regular basis. You may feel that if you’re not credit
active that you’re not actually going to be a – a suspect – or sorry
somebody that could get
LEWIS: A victim.
MONROE: A victim thank you – but it is actually those sort
of people that they’ve targeted.
LEWIS: So check your credit reference record. Neil
Monroe thanks very much from Equifax. And now computers. We
mentioned on our budget programme a valuable tax concession for
small businesses was about to be withdrawn and we’ve been flooded
with calls and emails asking for more details – Louise?
GREENWOOD: Yes, small businesses and self employed people
who buy computers or high tech phones can currently claim the whole
of the cost in the year they buy it. It comes straight off their profit and
reduces their tax but that three year old concession is ending on
Wednesday March 31st. If you need a computer or related IT
equipment perhaps a printer or software then make sure you buy it by
that date. After that the amount of tax relief you get will be halved.
Ideally you should have an invoice dated the 31st March or earlier and
do remember this is only for small businesses including the self
employed not the rest of us.
LEWIS: And you’ve also got to act quickly Louise to take
advantage of this year’s ISA allowance?
GREENWOOD: That’s right. The tax year ends on April 5th but
many providers are bringing down the shutters early. It’s already too
late to take out the top cash ISA with Intelligent Finance – the company
closed its doors last Wednesday but there’s still time just to apply for
the next best cash ISA – that’s Marks & Spencers which pays 4.5%.
LEWIS: That’s worth having but there’s some confusion
about the deadline?
GREENWOOD: Well Marks & Spencers tell us that the real
deadline is 5 pm tomorrow Sunday 28th – that just leaves time to apply
on line by phone or at a store. But some customers have been sent
letters telling them the deadline is Tuesday 30th and those favoured few
will have an extra two days to open the account.
LEWIS: Thanks Louise. Well that’s all we have time for
today. You can follow up all today’s items on our website –
bbc.co.uk/moneybox where there are stories and further information as
well as details of how to contact the programme which I see some of
you are doing already. You can also listen to the programme at any
time there and there’s also information with the BBC Action Line 0800
044 044 Working Lunch has personal finance stories each weekday –
12.30 BBC-2. Vincent Duggleby’s here on Monday with our phone-in
MONEY BOX LIVE on wills and estate planning. I’m back with
MONEY BOX next weekend as usual. Today the reporter was Louise
Greenwood, the producer Jennifer Clarke and I’m Paul Lewis.